Managing the life cycle of your products is crucial for effective merchandise management. Adapting to each stage of a product's journey - introduction, growth, maturity, and decline - helps maximize availability, flexibility, and turnover. While this might seem like Business Administration 101, its significance shouldn’t be overlooked, especially in industries like fashion, where market dynamics constantly evolve, and collections can have a short life cycle. Short reaction times to demand fluctuations are essential for optimal outcomes. However, managing multiple SKUs can be overwhelming amidst the sea of products.
No worries, we've got you covered! We constantly train our algorithm to learn seasonality and individual life cycle behavior per POS and SKU. To support this more intensively, we offer four comprehensive strategies for managing your products' life cycles at both store and article levels in Smart Supply. So, grab yourself a cup of coffee, and let's dive into the mysteries of Smart Supply together. Let's start at the beginning of the cycle:
The “New Mover Procedure” – You snooze, you lose
Introducing new articles into the fashion market comes with its challenges. The unpredictability of how each article will perform makes it difficult to forecast the optimal initial allocation and replenishment target level. Our “New Mover Procedure” simplifies the introduction process without any manual effort from your side.
Many brands start with a high initial allocation, pushing five products of each option (color and size) into stores without knowing the performance. However, this offers the risk of overstocking and losing sales.
To avoid these risks, we recommend starting with lower target numbers and enabling the “New Mover Procedure.” This setting allows Smart Supply to react more swiftly to the demand. Instead of slowly increasing replenishment targets over time, the procedure provides aggressive adjustments, ensuring optimal on-hand and target levels fitting the demand dynamics, giving space to better-performing articles. This functionality will lift target levels + 1 for each SKU sold for an x number of days, defined by the user.
Let’s look at an example: you introduce a new shirt into the market and start with a target level of three - on day four, you have already sold two. Instead of just replenishing two to fill up to three, Smart Supply increases the level to five, replenishing four SKUs. This might sound a bit complicated – in the picture below, we are explaining this example, and as we mentioned before – there is no manual effort required from your side. Smart Supply will react with your business's best profitability in mind.
With this feature, you can achieve high availability with rapid response times, increasing your sell-out as you go. Without the “New Mover Procedure”, Smart Supply's dynamic target adjustment will be more careful. This is not our only product life cycle management function. Optimizing during growth and maturity is just as crucial as the introduction phase, which brings us to the “Turnover Rate Threshold.”
The “Turnover rate threshold” – to replenish or not to replenish.
You can set a “Turnover rate threshold” for each SKU Option and store to decrease product risks. This ensures optimization and low risk by replenishment. This feature ensures optimal replenishment for high-performing products while stopping replenishment for SKUs falling below the turnover rate threshold. If sell-out rates pick up again, the replenishment automatically activates. With this, you ensure unsold products don't block in-store storage while maintaining availability in the distribution center.
After discussing two functionalities during the first three phases of a product's life - introduction, growth, and maturity - let’s explore how we support you during the last stage: the decline. Navigating this phase with minimal risk, we offer two options: a swift exit or a gradual phase-out. These options give the merchandiser control of the sell-out at the end of a season before introducing a new collection without risking overstock.
“Reduce target to one” – take a product quickly off the market.
For those seeking a quick decline phase to minimize leftover stock, the “Reduce Target to One” option is ideal. By setting a specific timeframe triggered x-days before the end-replenishment date, replenishment stops until the target level and stock-on-hand reach one.
“Phase Out” – softly take a product off the market.
If the “Reduce Target to One” approach feels too aggressive, we recommend the “Phase Out” option. Here, a specific timeframe triggered x days before the end-replenishment date initiates a gradual reduction in target and stock-on-hand levels until the product is phased out in smaller steps.
Which functionality do you think would benefit your merchandise management the most? Regarding Merchandise Management, we offer everything your heart might desire. Do you want to learn more about our Product Life Cycle Management or another feature? Click on the link to schedule a demo with us, and we will show you how it works: https://meetings.hubspot.com/nuno-goncalves/nuno-goncalves